Platinum Battles Back, Shrinking the Gold Gap

By Brendan Conway

The price of that other precious metal — platinum — is looking stronger of late. In fact, the price difference versus gold has narrowed to the smallest in nine months, notes the WSJ’s Laura Clarke:

In recent days, at any one point in time, gold has traded only around $53 higher than platinum, the narrowest exact differential since April 2012, when the metals briefly switched places. …

Supply concerns should also continue to support platinum this year, after the South African platinum industry was plagued by a series of mining strikes in the latter part of last year.

“Investment sentiment remains positive towards platinum especially. This is not necessarily because of a stellar improvement in real demand growth, but rather because of a distressed supply-side,” said Standard Bank metals analyst Walter de Wet.

She’s not alone in noticing the trend. Ned Davis Research’s Neil Leeson this week weighs whether investors should dial back on gold and put the money into a platinum fund. Not to suggest that the two metals are similar. They’re not.

Leeson backs into the idea via another call by his firm — being bullish on auto stocks. Platinum is distinguished from gold by its industrial and high-tech uses, especially its exposure to the auto industry. Half of newly mined platinum is used for purposes such as building catalytic converters, Leeson notes. It is, in short, a very different investment from the SPDR Gold Trust (GLD).

Fund investors seeking a high-risk, potentially high-reward bet on the metal can turn to ETFS Physical Platinum Shares (PPLT), There are also baskets of platinum and the other metals such as PowerShares Precious Metals (DBP). Farther afield are funds of miners such as the closed-end ASA Gold and Precious Metals (ASA). There’s even a platinum-miner ETF, the First Trust ISE Global Platinum Index (PLTM), although most investors won’t be comfortable owning a fund with just $9 million in assets.

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Chris Dieterich has covered the U.S. stock market for The Wall Street Journal and Dow Jones Newswires. He is a graduate of Regis University and the Missouri School of Journalism.